The executive's contract: specific features

The executive remains, in civil law terms, a subordinate employee: their relationship is governed by the individual employment contract of the Code of Obligations. But the top position changes the weight of the clauses. A senior manager or general director contract that mirrors the model of an ordinary employee leaves uncovered precisely the points that, in the event of a conflict, count the most: variable pay, working time, competition after leaving, liability. Let’s look at the specific features to keep under control.

Attenuated subordination, not absent

The executive organises their own work with wide autonomy, but remains embedded in someone else’s organisation and subject to the directives of the supreme body. This attenuated subordination has concrete consequences: the mandatory rules protecting the worker continue to apply, but some protections designed for the operational employee adapt to the role. Be careful not to confuse the executive-employee with the director: whoever sits on the board exercises a corporate function governed by partly different rules. A director may be only an employee, or may combine the corporate office; the contract must clearly state which of the two it is.

Fixed and variable pay

The most delicate knot is the variable component. It must be qualified precisely, because the legal nature decides whether it is owed or not:

• gratification (discretionary bonus): it depends on the will of the employer, who sets the conditions and amount; if it remains genuinely optional, no acquired right accrues;
• part of salary (commission, profit share with objective criteria): it is remuneration to all intents and purposes and cannot be denied if the agreed conditions are met.

A bonus described as discretionary but paid every year in significant and constant amounts risks being reclassified as salary. The calculation criteria, the moment of accrual and the fate of the variable in the event of leaving during the year must also be regulated.

Working time and overtime

To high-level executives the Labour Act does not apply for the part relating to hours and duration: no statutory supplements for night or Sunday work to the extent that the function excludes it. Under the Code of Obligations, however, the question of overtime remains: it is advisable to expressly stipulate that the remuneration, for the agreed level, also compensates the effort exceeding ordinary hours, to avoid subsequent claims.

Non-competition covenant

For the executive, who has access to the clientele and business secrets, the non-competition covenant is often essential. To be valid it must be in written form and limited as to place, time and object, so as not to unfairly compromise the person’s economic future. The permitted duration is limited and only in special cases exceeds the usual limits. The prohibition lapses if the employer terminates the relationship without a reason attributable to the worker, or if it is the latter who terminates for a reason attributable to the employer. A contractual penalty makes the covenant enforceable without having to prove the damage.

Termination, notice periods and release from the obligation to work

The ordinary notice periods apply, extendable by contract: in top positions longer notice periods are frequent. It is useful to provide for the release from the obligation to perform work during the notice period (garden leave), maintaining salary and duties of loyalty. The limits on termination at an inopportune time and the prohibition of abusive dismissal remain firm, exposing the employer to an indemnity.

Liability and confidentiality

The executive is liable for the damage caused by a breach of their duties, according to the diligence that can be required for the elevated function. If they are also a director, the liability of the corporate body towards the company, shareholders and creditors is added. The contract must close the perimeter with obligations of confidentiality and of returning documentation, and clarify the regime of the intellectual property produced in the assignment.

How we work at SIH ONE

We draft tailored executive contracts: we correctly qualify fixed and variable pay, calibrate the non-competition covenant and the contractual penalty, define notice periods, garden leave and liability, coordinating the contractual position with any corporate office.

Do you want an executive contract that holds up in negotiation and in the event of leaving? Discover the services of our tax-legal division and secure the clauses that count.